Suppose you face a debt situation and do not know what to do to settle and finally sleep calmly: is it advisable to acquire one more loan to unify everything in a single debt? Snowball or not, we tell you if it is a good alternative to settle one debt with another.
Let’s start with the first thing: loans, credits and any type of financing granted by an institution are not a gift. When you apply for any of these supports you must be aware that with them you can buy things that you would not buy in the short term for its cost as appliances or even bigger things.
If instead, you are one of the people who think you can use the credit for any purpose, even to solve the necessities of your daily life, you are probably doing everything wrong.
Debt processes do not necessarily start at the moment we take out a loan, accept a loan or receive a credit card, but when we decide that we can omit payments from our credit card or when we consider that it is not necessary to pay only the minimum.
The loans are then an additional tool that allows us to move forward. A loan has advantages, but it also entails obligations such as liquidating the debt within the agreed term.
Asking for a loan or a credit means being aware that it is a commitment that you will have to pay in the future. That is why it is very convenient that you previously calculate your ability to pay so you can get ahead.
Is it appropriate or not to request a loan more?
Asking for a loan to pay another is not the most convenient and doing so should only be an alternative for exceptional cases.
It is convenient that you first make a record of your debts and evaluate them otherwise you will not know if it suits you to ask for the loan or not to liquidate that commitment.
A very useful way to audit your debts is as follows:
- Write them all down
- Start with the priority ones.
- Determine what can be expected.
- Add the total.
Auditing lets you know what your real capacity to pay is in the face of a debt situation. In this way, if the debt is minimal, you can consider a credit with direct debit or payroll discount to cancel the cards that are eating you.
By necessity, many times families choose to request another loan to settle their current debts even knowing that they will have to pay more money and longer. The important thing is that if you go through a situation like this, be aware of everything that can happen.
Fortunately, in the market, there are credits that offer fairly good payment solutions with adequate terms and low or even fixed interest rates. The thing is about looking for the best financing to be able to liquidate that debt that is eating us.
Before resorting to another loan, analyze the options you have
Before asking for money once more you can analyze more options that allow you to settle your debts.
First of all, we recommend you to act with caution. Have you heard about debt repairers? These companies operate without any regulation They offer to negotiate with the bank or with other financial entities to settle your debt.
They usually offer rebates of your debt of up to 70% or 85% and also offer “erasure” from the Credit Bureau. The important thing is that if you go to one of these repair companies be clear that their activity is not regulated by the CONDUSEF so, before a fraud, this institution can not support you.
In addition, the repairers offer to negotiate on your behalf the restructuring or discounts of your debts with the bank, and sometimes they offer to take charge of the calls of the collection offices.
The majority of these companies carry fees in exchange for concepts of integration, registration, and opening of administrative procedures. In addition, they charge a monthly fee or percentage of the debt they manage to negotiate that goes from 10 to 15% per month.
For that reason, before a situation of indebtedness, you have another more legal possibility and much more useful: to go to the institution with which you have the commitment of the debt. No one is exempt from the “financial bumps”, but knowing how to act in the right way the results can be the best.
When you go to your bank to the institution to which you owe, you can obtain the following restructuring plans.
A fixed payment plan
This type of agreement allows “lowering” the amount of the payment to be made month by month. The benefit is that this does not generate more interest on the debts and that facilitates the payment of the debt in a much shorter period than if you lived paying the minimum.
When you opt for this agreement, you must be aware that you will not be able to dispose of your cards until you settle your debt, otherwise, the amount will increase again to pay month after month, and in this way, the insolvency cycle repeats itself.
Debt consolidation can work very well if you handle many cards because, with it, a single institution allows you to group all the debts into one. It is the equivalent of transferring the balance of many cards to one.
The key is in the choice you make. You must choose the institution that offers the lowest Total Annual Cost (CAT) or the lowest interest rate. In addition, you must ensure that you have canceled the cards that originated your debt and that they are settled so that they do not generate annuity fees.
When you have fallen into a moratorium, that is, you have let at least 90 days pass without paying a single peso to your debt, this is the option you can request. With that, the bank makes a “takedown” with which the amount of your debt decreases and even, interest is eliminated.
The disadvantage, however, is that your credit history will be affected and will reduce your chances of obtaining new financing for at least the next 6 years.
Let’s suppose that your situation is not so serious (although being indebted is not good).
Is it convenient to borrow from family and friends?
Although it may not be pleasant, sometimes you can ask friends or family for help to get out of the financial hole. Some people believe that it is better to go to loved ones and owe them before the bank.
Others, consider that asking for an advance of your salary can be a great option. Anyway, either way, represents that asking for a new loan when you can not pay the previous one is digging a bottomless pit in which you also harm or worry those who love you.
What you can do
Analyzing how you got here is a great breaking point so that next time you can get out of the quagmire without any problems or without making bad decisions. There is a before and an after in situations of indebtedness.
1. Read everything you sign, so you will know the conditions of the credit you are about to hire
2. Evaluate your ability to pay.
3. Keep in mind that your decisions will affect your credit history.
4. If you doubt any service, make sure you are registered with the Bureau of Financial Institutions.
1. Find a way to solve your debt.
2. Evaluate what is the probability that you liquidate it without help.
3. If you need help: ask for it.
4. Do not stand by.
The decisions you make at the peak of your debt can affect your entire financial future. So educate yourself financially and make sure you go with the best credit-granting institutions.